An Increase in the Number of Corporations in a Portfolio

question 6

Multiple Choice

An increase in the number of corporations in a portfolio from 1 to 10 reduces

• A)market risk by more than an increase from 110 to 120.
• B)market risk by less than an increase from 110 to 120.
• C)firm-specific risk by more than an increase from 110 to 120.
• D)firm-specific risk by less than an increase from 110 to 120.

---

Definitions:

Overall Profitability

A measure of the total financial gain or success of a business after all expenses and costs have been subtracted from revenue.

Marginal Subcontracting Cost

The additional cost incurred for each unit or batch of production or service delivery that is outsourced to a subcontractor.

Layoff Cost

The expenses associated with terminating employees, including severance pay, benefits continuation, and administrative costs.

Hiring And Training Cost

The expenses associated with recruiting, hiring, and training employees, which include advertising for positions, interviewing, onboarding, and educational programs.